Today’s March U.S. home price reports revealed a tenth straight month of outsized increases, with the S&P Case Shiller Index rising 2.2% to mark the biggest gain since May 2013, while the FHFA house price index rose 1.4%. The S&P measure has not declined since January 2019, while the FHFA measure has not declined since May 2020.

Home sales and construction data rose less than expected in the second quarter, thanks to labor shortages and high construction costs that caps affordability, leaving a large gap between supply and demand despite the modest rise in mortgage rates in the first quarter. The result is a huge rise in house prices that will likely continue until we are faced with a better balance between supply and demand in 2022.

• The S&P Case-Shiller house price index rose 2.2% in March to leave a 13.3% year-on-year gain.
• The FHFA house price index rose 1.4% in March to leave a 13.9% year-on-year gain.

The S&P Case-Shiller

The S&P Case-Shiller House Price Index jumped 2.2% to 251.6 in March for the 20-city measure, beating expectations and leaving the biggest gain since May 2013, after increasing 1 , 3% from February to 246.2 (up from 246.0). On a 12-month basis, the index posted a gain of 13.3% year-on-year, compared to an increase of 12.0% (up from 11.9%) a year earlier. This is the fastest pace of appreciation since the December 2013 rate of 13.4% y / y. Prices have been on the rise (y / y) since June 2012.

The March 10-City index rose 2.0% to 264.8, after gaining 1.2% in February to 259.6 (from 259.5). The 12 month clip grew at a 12.8% growth rate compared to the 11.7% y / y pop previously.

Once again, all 20 cities in the index posted 12-month gains, 1 of them in double digits, led by Phoenix (20.0% y / y) and San Diego (19.1% y / a), while Chicago took the lead (9.0% y / y).

The FHFA house price index

The FHFA house price index rose 1.4% to 324.9 in March, after rising 1.1% in February to 320.3 (from 319.7). Prices are up 13.9% y / y, up from 12.4% y / y (was 12.2%) in February. This house price index has risen by at least 0.9% in each of the past ten months, and prices have risen for 39 consecutive quarters. The index has posted monthly gains since January 2012, with the exception of a slight drop last May. For the first quarter, house prices are up 12.6% year-on-year and up 3.5% from the fourth quarter of 2020.

All nine census divisions covered posted gains in the month, led by the Mountain (2.2%) and New England (1.9%). In addition, the Mountain division led annual growth for 14 quarters.

The housing market is quite illiquid relative to the financial markets, and much of the market volume is skewed due to the home sales season in the spring. As such, we will see a more efficient “price discovery” process throughout the second quarter which should reveal significant price gains as real estate transactions close.